It’s a strategic merger as Mota is a CBD product marketing company with online retail brands in the US and Europe, while vertically-integrated Stillcanna focuses on large-scale CBD oil extraction and serves customers in Europe.
In a statement, Mota Ventures CEO Ryan Hoggan said he was “excited” to pursue a transaction with Stillcanna as the merger would “fit brilliantly” with Mota’s strategic expansion plan to “vertically integrate operations in Europe, while increasing profit margins in product offerings.”
“Product awareness and availability are still quite limited in Europe, which presents an opportunity for Mota to further establish its brands in a market that is expected to experience rapid growth in the near term,” said Hoggan.
“With the Stillcanna merger, we’re putting together a team that can create, market and sell consumer CBD products to European customers,” he added.
Stillcanna aims to be one of the largest producers of THC-free CBD extracts in Europe. Stillcanna’s Polish extraction facility, NEXUS, features centrifugal chromatography equipment that allows for the production of bulk THC-free CBD distillate, as well as custom cannabinoid profiles.
In February, Stillcanna’s Romanian extraction facility, ORIGIN, which is a joint venture with Stillcanna’s UK-based partner Dragonfly Biosciences, received approval from the Ministry of Health and the Anti-Drug Agency to become the first government recognized extraction facility Romania.
Stillcanna has invested C$23 million in cultivation and extraction operations, and still has approximately C$7 million as accessible cash.
Boosts Mota's retail offerings in Europe
Mota Ventures believes Stillcanna’s CBD extracts are key to “unlocking additional value” in Mota’s retail offerings in Europe. Through Stillcanna, Mota hopes to boost the supply of high-quality CBD for its expanding product line in Europe, while the large production capacity of NEXUS and ORIGIN will allow Mota to be a key supplier of CBD products in Europe.
Through the acquisition of First Class CBD, Mota has already become a major direct-to-consumer retail brand in the US. In 2019, First Class CBD spun nearly C$28.7 million in revenue. Mota’s e-commerce platform now serves over 140,000 customers and has generated 400,000 leads in the US.
Mota said with the rollout of First Class CBD’s e-marketing strategy in Europe, a merger with a “high-quality CBD producer” like Europe-focused Stillcanna is key to capturing the “large margins” in the CBD product supply chain.
“Combining a company that has established brands and direct-to-consumer sales channels with one that has proven CBD extraction expertise makes perfect sense to us,” said Stillcanna CEO Jason Dussault. “This merger completes the circle for Stillcanna, evolving from a seed to CBD concentrate company to a seed to retail sales company.”
Under the terms of deal, Stillcanna shareholders will receive one Mota share for every 1.8 Stillcanna shares. Based on the current outstanding share capital of Stillcanna, it is anticipated that Mota would issue around 61,597,082 shares to complete the transaction.
After completing the proposed transaction:
• All outstanding incentive stock options of Stillcanna will be exchanged for options to purchase Mota shares on the basis of the exchange ratio and will then be subject to Mota’s incentive stock option plan;
• All unexercised share purchase warrants of Stillcanna will be exchanged for warrants to purchase Mota shares on the basis of the exchange ratio and will expire in accordance with their current expiry dates.
The proposed deal doesn’t constitute a reverse-takeover of Mota, nor is it expected to result in a change of control for Mota, clarified the company. The deal will not cause any changes to Mota’s management or board.
Meanwhile, it is expected that Stillcanna’s management and board will assist in managing Stillcanna's business.
The proposed transaction remains subject to a number of conditions, including but not limited to:
• Stillcanna amending the terms of certain existing employment and consulting engagements
• Stillcanna shareholders holding at least 40,000,000 of outstanding share capital agreeing to the terms of a pooling arrangement restricting their ability to trade one-half of the Mota shares they receive for a period of six months following completion of the proposed transaction
• Stillcanna having positive working capital of not less than C$6 million after considering all expenses associated with the proposed transaction
• Mota completing a private placement to raise C$5 million. The financing will consist of units at C$0.45 per unit, with each unit consisting of one Mota share and a share purchase warrant. Each warrant will be exercisable to purchase a Mota share at a price of C$0.60 for a period of two years. All securities to be issued will be subject to a four-month-and-one-day statutory hold period in accordance with applicable securities laws.
Contact the author Uttara Choudhury at [email protected]
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